Having approved a performance-based ratemaking mechanism for Southern California Gas Co., the California Public Utilities Commission is free to rule on the merger of Pacific Enterprises (parent company of SoCal Gas) and Enova Corp., which owns San Diego Gas and Electric Co.
The PBR should reduce annual revenues by $160 million. If earnings exceed the authorized 9.49-percent rate of return, then a portion will be returned to customers.
The PBR is effective for five years. Each year, the PUC will adjust revenues by applying an index based on inflation and subtracting a productivity factor. The PUC will adjust the resulting figure for inflation. Unanticipated items, such as expenses to repair earthquake damaged facilities, will not be subject to PBR.
In deciding how to set the productivity factor portion of the index, the PUC accepted Commissioner Gregory Conlon's proposal to compensate the utility for its declining rate base. That factor will increase from 1.1 percent in year one, up to 1.5 percent in year five.
To make sure that safety and service do not decline while SoCalGas implements cost-cutting measures, performance standards were enacted. If utility performance falls below standards, the utility may be penalized through reduced rates.
The California PUC previously had delayed acting on the proposed Enova/PE merger. Now the PUC can move ahead on the merger, which was approved in June by the Federal Energy Regulatory Commission.